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Monday, August 08, 2016

Muted Action Amid Light News

Charles Schwab: On the Market

Posted: 8/8/2016 4:15 PM ET

Muted Action Amid Light News

Despite a jump in crude oil prices giving the energy sector a boost,
U.S. equities finished lower, led by declines in healthcare stocks.
Meanwhile, a dormant economic calendar was unable to provide any spark,
and a lackluster trade report in China also dampened sentiment. M&A
activity dominated the equity front, headlined by Dow member Wal-Mart
Stores' acquisition of Jet.com for roughly $3.0 billion. Treasuries were
little changed and the U.S. dollar was higher, while gold was modestly
lower.

The Dow Jones Industrial Average (DJIA) lost 14 points (0.1%) to 18,529,
the S&P 500 Index fell 2 points (0.1%) to 2,181 and the Nasdaq
Composite declined 8 points (0.2%) to 5,213. In moderate volume, 775
million shares were traded on the NYSE and 1.6 billion shares changed
hands on the Nasdaq. WTI crude oil rose by $1.22 to $43.02 per barrel,
wholesale gasoline lost $0.02 to $1.36 per gallon and the Bloomberg gold
spot price ticked $0.60 lower to $1,335.40 per ounce. Elsewhere, the
Dollar Index—a comparison of the U.S. dollar to six major world
currencies—gained 0.2% to 96.38.

Dow member Wal-Mart Stores Inc. (WMT $73) announced an agreement to acquire e-Commerce company Jet.com Inc
for about $3.0 billion in cash, with an additional $300 million of
Walmart shares being paid to the company over time as part of the
transaction. WMT finished lower.

Steinhoff International Holdings NV announced an agreement to acquire Mattress Firm Holding Corp. (MFRM $64) for $64.00 per share in cash, with a total equity value of about $2.4 billion. MFRM surged over 114%.

Tomorrow, the week's domestic economic calendar will heat back up, with the releases of preliminary 2Q nonfarm productivity and unit labor costs, forecasted to show production rose 0.5% month-over-month (m/m) and labor costs gained 1.8% m/m, as well as the NFIB Small Business Optimism Index for July, with economists anticipating a level of 94.5, matching that seen in June, while wholesale inventories will round out the day, expected to remain at June's flat reading.

However, the week will be headlined by some key reads on the consumer in the form of July retail sales and the preliminary University of Michigan Consumer Sentiment Index for August. In the recent Schwab Market Perspective: Is the Recent Rally for Real?,
our experts note that consumer confidence remains relatively healthy
according to the Conference Board, likely due at least in part to a
continued healthy job market. This has helped to move wages higher after
years of largely tepid or nonexistent gains according to the Atlanta
Fed Wage Tracker, which could have aided the recent move up in the
retail sales estimates for 2016 by the National Retail Federation. Read
more at www.schwab.com/marketinsight, and be sure to follow Schwab on Twitter: @schwabresearch.

Europe and Asia higher in wake of U.S. employment report

European equities finished modestly higher, with financials leading the
way on the heels of Friday's upbeat U.S. labor report, an analyst
upgrade in the sector and as Italian banking concerns remained in check.
Basic materials stocks gained ground despite some lackluster Chinese
trade data. Stronger-than-expected reads on German industrial
production, French business sentiment and eurozone investor confidence
may have also provided some support, while U.K. stocks modestly added to
a rally that began Thursday following the Bank of England's decision to
cut its benchmark interest rate and surprisingly boost its asset
purchases in the wake of the late-June Brexit vote. For more on the
potential impact of the Brexit vote, read Schwab's Director of Market
and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Brexit's Impact on Sectors, Part Two, at www.schwab.com/marketinsight. The euro dipped and the British pound was lower versus the U.S. dollar, while bond yields in the region finished mixed.

Stocks in Asia finished higher, with Friday's stronger-than-expected
U.S. July nonfarm payroll report boosting global sentiment and
overshadowing a lackluster trade report out of China. Japanese equities
rallied, bolstered by the yen extending its decline after the U.S.
dollar gained ground on Friday's U.S. jobs data. Mainland Chinese stocks
and those traded in Hong Kong advanced, even as the nation reported
larger-than-expected drops in July exports and imports when reported in
dollar terms. Australia's markets moved higher, led by the heavyweight
oil & gas, financials and basic materials sectors, while some upbeat
earnings reports helped push Indian securities higher, while South
Korean stocks also gained ground. For analysis on how the recent Zika
pandemic may or may not affect the markets, see the latest article from
Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA,
titled Does Zika pose an Olympic-sized threat to stocks?, at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop.

Tomorrow's international economic calendar will be fairly heavy, with
reports scheduled for release to include: CPI and PPI from China,
business confidence from Australia, trade data from Germany, industrial
and manufacturing production and trade figures from the U.K., and retail
sales from Brazil. In central bank action, the Reserve Bank of India
will meet, with no change to its monetary policy stance expected.

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